Shearman And Sterling

News January 09, 2014

Shearman & Sterling Secures Favorable Circuit Court Decision for Abengoa

Shearman & Sterling secured a favorable Circuit Court decision for client Abengoa in a long battle over the enforcement of two ICC arbitration awards.

The dispute arose from Abengoa’s acquisition of a sugar and ethanol business from Brazilian businessman Adriano Ometto in 2007. Two years later, Abengoa filed two ICC arbitrations against Ometto claiming that he had made significant misrepresentations before the sale. The ICC Tribunals, both chaired by Debevoise & Plimpton LLP partner David Rivkin, rendered two awards in favor of Abengoa in November 2011, which totalled nearly US$ 110 million in damages.

Although Abengoa and Ometto both stated at the close of the proceedings that they were satisfied with the way the arbitrations had been conducted, Ometto soon launched a carefully-orchestrated attack against the awards before the ICC, alleging partiality on the part of the Tribunal’s Chair and requesting the correction of the awards pursuant to the ICC Rules. Ometto argued that his investigation revealed certain representations by Mr. Rivkin’s colleagues during the arbitration where Mr. Rivkin’s law firm had been opposite Abengoa in a number of corporate transactions. Rivkin eventually resigned. A newly constituted tribunal heard Ometto’s application for correction and confirmed the award.

Ometto simultaneously petitioned the United States District Court of the Southern District of New York to vacate the awards on the grounds that the Tribunal’s Chair was “evidently partial” and that the awards were rendered in “manifest disregard” of Brazilian law. Shearman & Sterling filed a cross-motion seeking the confirmation of the awards on behalf of its client Abengoa. In a ruling dated January 7, 2013, after an evidentiary hearing held in July 2012, District Court Judge Jed Rakoff found in favor of Shearman & Sterling’s client, denying Ometto’s petition to vacate and granting Abengoa’s motion seeking confirmation of the awards.

Ometto subsequently sought to appeal the District Court’s decision to the United States Court of Appeals for the Second Circuit. By way of a summary order rendered on January 7, 2014, Circuit Court Judges Rosemary S. Pooler, Barrington D. Parker and Denny Chin affirmed the District Court’s ruling, holding that the longstanding “evident partiality standard” under Section 10 of the Federal Arbitration Act could only be met “where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration.”

The Court also denied Ometto’s appeal on the second ground of manifest disregard of Brazilian law, holding that a “‘severely limited’ standard of judicial review” had to be applied by the Court, that “manifest disregard of the law is rare” and that the Court had to be “deferential to the arbitral award.”

In the proceedings before the reconstituted Tribunal, the United States District Court for the Southern District of New York and the United States Court of Appeals for the Second Circuit, Abengoa was represented by international arbitration partner Henry Weisburg (New York), assisted by international arbitration associate Anna Tevini (New York) and litigation associate Andrew Rodgers (New York).

Regional Experience